![]() AEO2021 reflects these trends, with model changes including reducing drilling responsiveness to price increases in the short term and increasing the hurdle rate of return. COVID-19 has accelerated this trend, leaving producers more dependent on internal sources of cash flow because outside funding sources are less available or require higher rates of return. The oil and natural gas industry was already headed toward relying on capital from cash flow instead of debt and equity. Producers are more dependent on capital from cash flow oil production rates compared with AEO2020. Thus, given the current economic downturn, EIA expects a lower price path in the short and medium term to decrease U.S. ![]() In AEO2021, the oil price is the primary driver of projected drilling activity and accompanying U.S. Uncertainty surrounding post-pandemic expectations for oil and natural gas demand translates to uncertainties in supply through prices.
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